“Because it is currently difficult to measure the effect of demand from foreign residents, the governments of Canada and British Columbia have announced plans to improve collection of data on foreign ownership of Canadian real estate,” the Bank of Canada said in its recently released Financial System Review. “To the extent that foreign demand reflects buy-and-hold investment, it does not directly increase the risk of a house price correction. Together with other factors stoking demand, however, foreign demand does contribute to price increases that are driving the rise in house-hold indebtedness.
The 47 review touched on a number of issues currently plaguing the housing market, including the divergent trends in the British Columbia and Toronto markets compared to other, struggling markets.
The report also predicted price softening in those two markets.
“It is unlikely that the current pace of price increases in the GVA and GTA can be sustained. Supply will be somewhat more elastic in the long term, and it is unlikely that demand fundamentals will justify continued strong price increases,” the Bank said. “The rapid pace of price increases seen over the past year also raises the possibility that prices may be supported by self-reinforcing expectations, making them more sensitive to an adverse shock to housing demand.”
to access the entire review.
There is no fear of housing market crash due to foreign ownership, according to the Bank of Canada.